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Ethereum EIP would burn staking rewards once half the supply is staked

The proposal sets a 60.25 million ETH saturation balance, at which point validators performing duties perfectly would earn zero net consensus yield as issuance is effectively cancelled.

Reported · Written up by our desk · Market Structure

Ethereum developers have submitted a proposal, EIP-8361, that would gradually burn a rising share of validator rewards and destroy the ETH to cancel issuance as staking reaches a defined threshold. Under the plan, the burn fraction would scale with the staking ratio raised to the power of 1.5, reaching 100% at a fixed saturation balance of 60.25 million ETH, which is roughly half the supply at the time of the fork.

The proposal would change only Ethereum’s consensus layer. Its authors argue this is needed because the staking ratio has been climbing, with Ethereum’s staking ratio passing one-third of supply in April, and because the validator entry queue is adding about 1.75 million ETH per month, according to the EIP.

According to the proposal’s co-author Jérôme de Tychey, a conservative worst case puts more than 70 million ETH staked by January 2028, above 55% of supply, and says each month of delay would be worth around 1.5 points of staking ratio. Isidoros Passadis of Lido said the change could be too complex to rush and warned it might price expert node operators out of the market.

The EIP also targets the current incentive structure, where the report says yield falls only with the square root of the staking ratio and keeps a floor near 1.5% regardless of how much ETH is staked. Decrypt reports that under the EIP’s design, validator net consensus yield would drop to zero once the saturation balance is reached, while the change would phase in over an 18-month transition.

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